Log in or subscribe to read this article

Yangfan Group remains optimistic despite deciding to cut its capacity

Shipyard manages to ride out the shipbuilding market downturn thanks to support from parent company Jianlong Group and the Zhoushan city government

Yangfan Group is cutting its shipbuilding capacity by 25% as it adopts a strategy counter to Japanese-owned rival Tsuneishi Group (Zhoushan) Shipbuilding.

The Chinese shipbuilding group, which has three yards in the Zhejiang province city of Zhoushan, will be closing down one of its complexes.

Yangfan executive director and president Tao Zhonghai tells TradeWinds that the group’s Zhoushan Shipyard will cease operations by the end of next month.

Government officials have asked Yangfan to vacate the shipbuilding site as the 385,000 square metres of land will be used for commercial and tourism development. Yangfan received a payout of a few hundred million renminbi, which is the equivalent to a few tens of millions of dollars.

Yangfan’s Zhoushan Shipyard is the oldest of the three facilities that the group owns. Founded in 1952 as a state-owned company, the shipyard was privatised in 2005 and taken over by Yangfan’s current parent company — Jianlong Group — a year later. Zhoushan Shipyard’s annual shipbuilding capacity reached 500,000 dwt and was capable of constructing vessels of up to 92,500 dwt.

“The closure of Zhoushan Shipyard has in a way reduced pressure for us,” Tao says. “With only two shipyards left [Zhejiang East Coast Shipbuilding and Zhoushan Dashenzhou Shipbuilding], pressure for us to take on newbuildings orders will be less. We can put our focus in operating them.

“There is no plan for a third shipyard for Yangfan at the moment.”

Like most Asian shipyards, the prolonged shipbuilding recession has weighed on Yangfan. The shipbuilding group faced cash-flow problems amid a low volume of new building contracts. In addition, shipping companies abandoned orders that were signed during the market boom.

Italy’s D’Amico was reported to be one of the shipowners that did not take delivery of the newbuildings it placed at Yangfan. The vessels were eventually resold to other shipping companies.

At that time, there were also several reports that Yangfan may join the list of collapsed shipyards in China due to cash-flow issues.

“Yangfan was never near [a] bankruptcy situation,” Tao says. “Those were wrong reports and were based on groundless rumours.”

Yangfan says it managed to ride through the tough shipbuilding period and had received cash injections from its parent company. On top of that, the Zhoushan government has also loaned out an undisclosed amount to the shipyard — but that sum has not been disclosed.

“2016 was the most difficult year for the shipbuilding sector but that is over now,” Tao says. “However, the industry will continue to face challenges such as cost competition from rival shipyards and getting banks to support the business.”

Tao says financial institutions are reluctant to engage in shipbuilding activities as they view the sector to be high risk.

“The closure of private shipyards due to the poor shipbuilding market is another reason that has caused banks to be unwilling in giving out loans,” he says.

According to Tao, there were around 40 shipbuilding companies in Zhoushan during the market boom, but there are less than 10 in business today.

“However, banks will start supporting the shipbuilding industry once the good market returns,” he says.

Moving forward, Yangfan is hopeful for the shipbuilding industry as it believes the poor market has bottomed out. The company also thinks the sector could benefit from China’s Belt and Road Initiative.

“So long [as] the maritime industry is in existence, there will be demand for new ships,” Tao says.

Yangfan is selective of the types of ships it wants to construct. It is only marketing feeder containerships of less than 4,000 teu, midsize bulkers, chemical tankers of less than 40,000 dwt and Yangfan-designed pure car/truck carriers of 5,000 ceu to 8,500 ceu.

With the recovery in the shipping market, Yangfan says it has received increased enquiries for newbuildings of all ship types, mostly from companies in Europe.

“We will not be taking loss-making order deals and contracts that have too little initial down payment,” Tao says. “The reasons for doing this are to prevent cash-flow problems and to reduce risks.

“Yangfan has an order backlog of around 23 newbuildings and the orderbook can keep the company busy for two years.”

Shipping outfits that have vessels under construction at the Chinese yard include Polsteam, Bernhard Schulte and Italy's Grimaldi Group.

When asked if there was a possibility that collapsed Chinese shipyards would be revived, Tao replied: “Yes — if the shipbuilding facility is still there, but it will not be easy to restart the operation.

“Not all shipyards will be 'resurrected', as several have turned to other businesses such as steel production. There is little chance that we will ever see the boom shipbuilding period between 2004 and 2008.”

Get the latest and most important news of the day – sign up for free to the TradeWinds Daily News Update

Yangfan Group remains optimistic despite deciding to cut its capacity

Shipyard manages to ride out the shipbuilding market downturn thanks to support from parent company Jianlong Group and the Zhoushan city government

Yangfan Group is cutting its shipbuilding capacity by 25% as it adopts a strategy counter to Japanese-owned rival Tsuneishi Group (Zhoushan) Shipbuilding.

The Chinese shipbuilding group, which has three yards in the Zhejiang province city of Zhoushan, will be closing down one of its complexes.

Yangfan executive director and president Tao Zhonghai tells TradeWinds that the group’s Zhoushan Shipyard will cease operations by the end of next month.

Government officials have asked Yangfan to vacate the shipbuilding site as the 385,000 square metres of land will be used for commercial and tourism development. Yangfan received a payout of a few hundred million renminbi, which is the equivalent to a few tens of millions of dollars.

Yangfan’s Zhoushan Shipyard is the oldest of the three facilities that the group owns. Founded in 1952 as a state-owned company, the shipyard was privatised in 2005 and taken over by Yangfan’s current parent company — Jianlong Group — a year later. Zhoushan Shipyard’s annual shipbuilding capacity reached 500,000 dwt and was capable of constructing vessels of up to 92,500 dwt.

“The closure of Zhoushan Shipyard has in a way reduced pressure for us,” Tao says. “With only two shipyards left [Zhejiang East Coast Shipbuilding and Zhoushan Dashenzhou Shipbuilding], pressure for us to take on newbuildings orders will be less. We can put our focus in operating them.

“There is no plan for a third shipyard for Yangfan at the moment.”

Like most Asian shipyards, the prolonged shipbuilding recession has weighed on Yangfan. The shipbuilding group faced cash-flow problems amid a low volume of new building contracts. In addition, shipping companies abandoned orders that were signed during the market boom.

Italy’s D’Amico was reported to be one of the shipowners that did not take delivery of the newbuildings it placed at Yangfan. The vessels were eventually resold to other shipping companies.

At that time, there were also several reports that Yangfan may join the list of collapsed shipyards in China due to cash-flow issues.

“Yangfan was never near [a] bankruptcy situation,” Tao says. “Those were wrong reports and were based on groundless rumours.”

Yangfan says it managed to ride through the tough shipbuilding period and had received cash injections from its parent company. On top of that, the Zhoushan government has also loaned out an undisclosed amount to the shipyard — but that sum has not been disclosed.

“2016 was the most difficult year for the shipbuilding sector but that is over now,” Tao says. “However, the industry will continue to face challenges such as cost competition from rival shipyards and getting banks to support the business.”

Tao says financial institutions are reluctant to engage in shipbuilding activities as they view the sector to be high risk.

“The closure of private shipyards due to the poor shipbuilding market is another reason that has caused banks to be unwilling in giving out loans,” he says.

According to Tao, there were around 40 shipbuilding companies in Zhoushan during the market boom, but there are less than 10 in business today.

“However, banks will start supporting the shipbuilding industry once the good market returns,” he says.

Moving forward, Yangfan is hopeful for the shipbuilding industry as it believes the poor market has bottomed out. The company also thinks the sector could benefit from China’s Belt and Road Initiative.

“So long [as] the maritime industry is in existence, there will be demand for new ships,” Tao says.

Yangfan is selective of the types of ships it wants to construct. It is only marketing feeder containerships of less than 4,000 teu, midsize bulkers, chemical tankers of less than 40,000 dwt and Yangfan-designed pure car/truck carriers of 5,000 ceu to 8,500 ceu.

With the recovery in the shipping market, Yangfan says it has received increased enquiries for newbuildings of all ship types, mostly from companies in Europe.

“We will not be taking loss-making order deals and contracts that have too little initial down payment,” Tao says. “The reasons for doing this are to prevent cash-flow problems and to reduce risks.

“Yangfan has an order backlog of around 23 newbuildings and the orderbook can keep the company busy for two years.”

Shipping outfits that have vessels under construction at the Chinese yard include Polsteam, Bernhard Schulte and Italy's Grimaldi Group.

When asked if there was a possibility that collapsed Chinese shipyards would be revived, Tao replied: “Yes — if the shipbuilding facility is still there, but it will not be easy to restart the operation.

“Not all shipyards will be 'resurrected', as several have turned to other businesses such as steel production. There is little chance that we will ever see the boom shipbuilding period between 2004 and 2008.”